9% Muthoot Finance NCD – April’18 – Should you Invest?
Muthoot Finance, the dominant player in Gold Loan Business has come out with public issue of non-convertible debentures (NCD) offering up to 9.00% interest rate. The issue would open on April 9 and would close on May 8, 2018.
Muthoot Finance NCD – Significant Points:
Offer Period: April 9 to May 8, 2018
Annual Interest Rates for Retail Investors: 8.00% to 9.00% depending on tenure
Price of each bond: Rs 1,000
Minimum Investment: 10 Bonds (Rs 10,000)
Max Investment Limit for Retail Investor: Rs 10 Lakhs
Credit Rating: ‘AA (Stable)’ by ICRA and ‘AA/Stable’ by CRISIL
NCD Size: Rs. 500 Crores with an option to Retain Over-subscription Up to Rs 3,000 crore
Allotment: First Come First Serve
Listing: Bonds would be listed on BSE and will entail capital gains tax on exit through secondary market
The interest rates trend is rising. In last two months SBI has raised its interest rate on fixed deposit by 0.75%. It seems like the interest rates would go up more in near future. Hence should not lock your investment for long term.
The fortune of Gold Loan companies are dependent on Gold Prices. Any negative correction to Gold prices can be bad for company
There has been consistent drop in profits of the company and increase in NPAs. If this continues, there might be issues in serving regular interests.
There are NCDs available in secondary market which have higher yields with similar rating. The problem is low liquidity and hence is difficult to buy in large numbers.
The present Tax Free Bonds are offering yields up to 6.5% in secondary market, which is better investment for People in highest tax bracket.
In case you don’t want to do it online, you can download the application form from company site or Financial Institutions and submit to collection centers.
Also note that only option I to VI is also available in Physical Form while option VII to X would only be available in Demat Form.
Recommendation:
My recommendation is to invest some part of your Fixed Income investment in this NCD Issue
The interest rates are likely to go up in near future, hence select less than 2/3 years tenure.
You should always have diversified portfolio be it fixed deposit, NCD or equity investment
Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value
If you plan to invest in this issue, do it early as most NCD issues are over-subscribed before the end date.
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Amit
Hi Readers! I am Amit, the mind behind Apnaplan.com
I am MBA from NITIE, Mumbai and BIT from Delhi University.
This blog is my online diary where I write about my tryst with my investment decisions. In the 400+ posts on this blog you will find articles on Personal Financial Planning, Investments, Retirement Planning, Insurance, Loans, Fixed Deposits, Provident Funds, Stock Markets, Gold, Silver, Real Estate Investment, Credit Cards, Credit Score, Taxation, Inheritance Planning and Reviews on various Financial Products.